When atheists get it wrong

September 2, 2008 at 4:46 pm (economics, society)
Tags: capitalism, debunk, fallacy, free market, taxation

One of my favorite bloggers, Ebonmuse of Daylight Atheism, occasionally writes on topics outside the typical atheist fare, such as morality or poetry, but also the subject of capitalism.

Having a better-than-average knowledge of capitalism, I cringe when such blogs appear, because they often deviate from Ebonmuse’s usual high standard of critical thought.  Too frequently, they contain long-discredited capitalist canards which only find currency among the hard left.  These are the “springboards” for Ebonmuse’s larger points he wishes to make about capitalism.  One is tempted to give Ebonmuse the benefit of the doubt and suggest that he is merely responding to one school of capitalism. But alas, its supporters (aka, free-marketeers) are far more in agreement on capitalist economics, than, say, members of a particular religion.  At the least, Ebonmuse should augment his assertions with relevant quotes or examples, but this is rarely, if ever, done.

What follows is my critique of a recent Ebonmuse blog entitled “Spread the Wealth: Further Thoughts on Capitalism“.  Allow me to reiterate that I agree with much of what Ebonmuse writes and greatly appreciate his contributions to free-thought, but I believe that some of his views on capitalism are simply wrong.

Ebonmuse starts with a fair summary of the vast benefits capitalism has wrought, but he goes badly off-track with the following:

Some people, especially libertarians, seem not to grasp this. They act as if competition itself was the end, as if inequality was the end – and this is absurd.

Competition and inequality are ends?! No, no, no! A thousand times, no! The absurdity here is ascribing such a view to people like libertarians.  Free-marketeers (a circle of individuals far wider than libertarians, by the way) would fully agree with Ebonmuse’s view that competition is merely a means to better ends.  When free-market economists like the late Milton Friedman argue for competition in the provision of public education, for example, they justify it not on the basis that competition is the good we will achieve, but what good competition will bring: more choice, better quality, higher standards, etc.  Tsk, tsk.  A few minutes reading Adam Smith, Friedrich Hayek, Ludwig von Mises, or Friedman himself would have quickly dispelled this ridiculous notion.

Ebonmuse continues:

The purpose of the economy is, or at least should be, to produce happiness, not to produce winners and losers. Competition is merely the means; the end is producing greater wealth and greater opportunity, and with them, greater well-being for all members of society.

Happiness is certainly a desired end, but it is most definitely not the economy’s purpose to produce it; only individuals can do that for themselves.  This is more economic illiteracy.  The purpose of the economy–any economy–is to exploit limited resources to produce and distribute goods and services demanded by consumers in as efficient manner as possible.  Winners and losers are the inevitable by-product of a host of factors, many of which lie outside the control of us humans (at least for now), and appear in any economic system.  How does Ebonmuse propose to know when maximal happiness, and thus a fully purposed economy, has been achieved?  He does not say.  At least, he demonstrates a true understanding of competition’s role, though one wonders where he obtained it.  From Karl Marx?  It certainly could not have come from a free-marketeer…

We now come to Ebonmuse’s central point:

This is why progressive, redistributive taxation is a vital part of any civilized state’s economic policy. Those libertarian philosophies which would allow individuals to accumulate unlimited wealth without interference have lost sight of why an economy and a state exist in the first place. By allowing some people to acquire unlimited wealth, they have implicitly decided that their goal is happiness not for everyone, but only for a privileged few. By any reasonable standard of morality, this is wrong. By aiming at a suboptimal standard, they would construct a state that enjoys less prosperity and less happiness in general, and such nations will inevitably be outcompeted by those that ensure a fair distribution of basic resources.

Ebonmuse has committed a sleight-of-hand.  It is now the economy’s and state’s purpose to produce happiness, presumably achieved by the “vital” policy of progressive, redistributive taxation. But economies don’t tax; governments perform that function.  Does Ebonmuse believe it’s actually the state’s, not the economy’s, purpose to produce happiness?

It doesn’t much matter.  As well, a debate on the role of government is beyond our scope.  The question under contention is whether such taxation as Ebonmuse proposes will do as he intends.  Without any evidence or support, Ebonmuse asserts that predation of income translates into an increased level of happiness overall.  If some individuals possess “unlimited income,” this means, ipso facto, that others are sub-optimally happy.  Why is that?  Ebonmuse does not explain, but he does state that such a state of affairs is desired by libertarians.  What’s more, without any evidence or support, Ebonmuse declares that this state will produce less prosperity, less happiness, and relative competitive stagnation compared to countries which follow his prescription.  For someone who claims allegiance to reason, evidence, and logic, his assertions are remarkably lacking these qualities.

“That which can be asserted without evidence can be dismissed without evidence,” as an infamous contemporary atheist puts it, so, normally, we could dismiss Ebonmuse’s views on that basis alone.  However, since Ebonmuse is widely and rightly regarded as a studios blogger, I think more is needed to undermine his case.  So, in counterpoint, allow me to present the example of Hong Kong.

Hong Kong is a city governed by China since 1989, but one who’s traditional free-market, low-tax policies have largely been allowed to remain unchanged.  Its tax rate for individuals and corporations around 17%, as well tax revenue as a percentage of GDP of 12.7%, are among the lowest in the world, yet its GDP per capita is one of the highest.  According to Ebonmuse, the citizens of Hong Kong should be downright miserable, what with all that unredistributed income floating around, yet surveys place its citizens above the median among international comparisons, exactly equal to the French.  If Ebonmuse wishes to make his case, he needs to explain away examples like Hong Kong and offer up those which support his claims.

At root of Ebonmuse’s errors, is the view–so common among critics of capitalism–that there is a fixed amount of wealth; if some people have more, it must mean that others have less.  The view is a fallacy.  There is no fixed amount of wealth. Rather than redistribute the pie, government policymakers need to focus on expanding it.  This is what motivates free-marketeers to champion capitalism and low, unbiased taxes.

Another error concerns the assumption that behavior will remain unchanged in light of new economic circumstances.  If we raise the tax rate to X, the treasury will obtain Y income.  True, but only in the short run.  Experience has shown time and time again that taxpayers respond to changes in tax rates.  Exactly how is not always predictable, but for the most part, high marginal tax rates actually produce a drop in revenues.  This is why many countries have actually lowered top marginal tax rates since the ’80s.

I encourage Ebonmuse to direct his considerable intellect toward garnering a better understanding of capitalism and economics.  It’s a bit of a shame to see such an important atheist blog somewhat discredited by a few flawed views.